EMERGING MARKETS-Stocks fall for fourth day on N.Korea, Fed nerves

Alexander Winning

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LONDON, Sept 26 (Reuters) - Emerging market stocks fell for a fourth straight day on Tuesday, weighed down by the ongoing war of words between North Korea and the United States as well as the prospect of higher U.S. interest rates.

North Korea’s foreign minister said on Monday that a weekend tweet by U.S. leader Donald Trump counted as a declaration of war and that Pyongyang reserved the right to shoot down U.S. bombers. That has boosted the appeal of safe-haven assets .

The dollar was broadly stronger on Tuesday amid expectations the Federal Reserve is preparing to tighten monetary policy.

“We have two driving factors here - first the situation around North Korea is limiting risk appetite globally, and the second issue is that a bit of dollar strength caused by the likelihood of a Fed rate hike in December is causing nervousness in the EM world,” said Jakob Christensen, chief emerging markets analyst at Danske Bank.

“But we see these risks fading as military intervention is a low probability event, and we also see dollar strength as a temporary phenomenon,” he said.

MSCI’s emerging equity benchmark fell 0.6 percent to its weakest in around three weeks, also dragged lower by a second day of sharp losses in the EM tech index.

EM tech stocks are up more than 47 percent this year versus a 25 percent gain for the benchmark index, but they have been pressured by a recent sell-off in U.S. rival Apple.

Bourses in Asia were broadly weaker on Tuesday and South African stocks fell 1.4 percent after Monday’s closure for a public holiday, but emerging Europe including Hungary and Russia saw modest gains.

Asian currencies weakened, led by South Korea’s won and China’s yuan, though the Turkish lira, South African rand and Russian rouble nudged higher.

Among policy decisions scheduled for Tuesday, Nigeria’s central bank is expected to leave its main interest rate on hold at 14 percent.

Nigerian naira bonds have been in demand among foreign investors in recent weeks, with recent auctions well bid on signs inflation is easing. Yields have fallen around 300 basis points since May on the three-month t-bills.

Analysts polled by Reuters expect the Nigerian central bank will wait for either January or March before kicking off its own easing cycle.